EMV credit cards are the wave of the future. But that future could be very expensive.
Short for Europay, MasterCard and Visa, EMVs are a relatively new type of credit card equipped with embedded security chips designed to prevent fraudulent activity. It's no longer enough to copy down a user's 16-digit card number. The plastic (and chip) must be physically present at point-of-sale registers in order to make a purchase:
- Chip & Signature EMVs require that shoppers sign their names in order to complete a purchase.
- Chip & PIN EMVs require shoppers to enter in a personal identification number to authorize the transaction.
Although most swipe & sign terminals can read EMV credit cards, only newer chip-enabled terminals are able to leverage the extra security features embedded in the technology.
According to a recent report by Javelin Strategy & Research, making the transition to newer credit card readers could cost U.S. merchants $2.6 billion by 2018 — an exorbitant sum that doesn't include extra expenses like training employees how to use the new hardware.
U.S. Merchants Are Likely to Miss the 2015 EMV Deadline
The United States credit card industry was initially scheduled to reach 100 percent EMV compliance by 2015. But both card issuers and merchants continue to lag behind:
- By the end of 2015, American card companies will have sent out only 166 million EMV credit cards and just over 100 million chip-enabled debit cards — or 29 percent and 17 percent total penetration respectively.
- Even more troubling, the vast majority of retail merchants across the country prefer not to “waste” money upgrading their hardware to become EMV-compliant.
- Arguably the biggest hurdle is awareness. In a market where both merchants and consumers remain ignorant of EMV’s security benefits, there simply isn't a perceived need to switch.
And yet, the United States stands alone in the global credit card industry. EMV credit cards have become the official standard in nearly every country around the planet (even neighboring Canada will make EMV cards mandatory by 2015).
Government mandates and shifting liability laws help to explain this rapid global adoption of EMV technology. In most international markets, merchants had no other choice but to upgrade their credit card reading hardware.
But in the U.S., these mandates have yet to become truly universal.
The Cost of Not Becoming EMV-Compliant
$2.6 billion represents a hefty price to pay. But the cost of not becoming EMV-compliant could be much higher.
The U.S. represents nearly 25 percent of global credit and debit card use — but almost 50 percent of global credit card fraud. American merchants' continued reluctance to embrace EMV technology makes the United States “low-hanging fruit” for would-be hackers and thieves.
Viewed in this light, hardware updates may be the cheaper option, especially as new liability laws place greater pressure (and rising costs) on stateside merchants who aren’t EMV-ready.
Although the cost and hassle of installing EMV credit card terminals may seem daunting at first, it's an investment that ends up paying for itself once you factor in fraud reduction and increased consumer confidence.
To learn more about EMV credit cards, use the free links below: